1.

The two words most often used by economists are;-

a. Prices and quantities.

b. Resources and allocation.
c. Supply and demand.
d. Efficiency and equity.

2. In a market economy, supply and demand determine;-

a. Both the quantity of each good produced and the price at which it is sold.

b. The quantity of each good produced but not the price at which it is sold.

c. The price at which each good is sold but not the quantity of each good produced.

d. Neither the quantity of each good produced nor the price at which it is sold.

3. In a market economy;-

a. Supply determines demand and demand, in turn, determines prices.

b. Demand determines supply and supply, in turn, determines prices.

c. The allocation of scarce resources determines prices and prices, in turn, determine
supply and demand.

d. Supply and demand determine prices and prices, in turn, allocate the economy’s scarce
resources.

4. Most markets in the economy are;-

a. Markets in which sellers, rather than buyers, control the price of the product.

b. Markets in which buyers, rather than sellers, control the price of the product.

c. Perfectly competitive.

d. Highly competitive.

5. In a competitive market, each seller has limited control over the price of his product because:-

a. Other sellers are offering similar products.

 b. Buyers exert more control over the price than do sellers.

c. These markets are highly regulated by the government.

d. Sellers usually agree to set a common price that will allow each seller to earn a
comfortable profit.

6. The quantity demanded of a good is the amount that buyers are;-

a. Willing to purchase.

b. Willing and able to purchase.

c. Willing, able, and need to purchase.

d. Able to purchase.

7. A decrease in quantity demanded;-

a. results in a movement downward and to the right along a demand curve.

b. results in a movement upward and to the left along a demand curve.

c. shifts the demand curve to the left.

d. shifts the demand curve to the right.

8. When the price of a good or service changes;-

a. the supply curve shifts in the opposite direction.

b. the demand curve shifts in the opposite direction.

c. the demand curve shifts in the same direction.

d. there is a movement along a given demand curve.

9. “Other things equal, when the price of a good rises, the quantity demanded of the good falls, and
when the price falls, the quantity demanded rises.” This relationship between price and quantity
demanded is referred to as;-

a. equilibrium.

b. the law of demand.

c. the relationship between supply and demand.

d. the definition of an inferior good.

10. Which of the following demonstrates the law of demand;-

 a. After Jon got a raise at work, he bought more pretzels at $1.50 per pretzel than he did
before his raise.

b. Melissa buys fewer muffins at $0.75 per muffin than at $1 per muffin, other things equal.

c. Dave buys more donuts at $0.25 per donut than at $0.50 per donut, other things equal.

d. Kendra buys fewer Snickers at $0.60 per Snickers after the price of Milky Ways falls to $0.50
per Milky Way.

11. When the price of hot dogs changes, the demand curve for hot dogs;-

a. Shifts because the price of hot dogs is measured on the vertical axis of the graph.

b. Shifts because the quantity demanded of hot dogs is measured on the horizontal axis of the
graph.

c. Does not shift because the price of hot dogs is measured on the vertical axis of the graph.

d. Does not shift because the price of hot dogs is measured on the horizontal axis of the graph.

12. If goods A and B are complements, then an increase in the price of good A will result in;-

a. more of good A being sold.

b. more of good B being sold.

c. less of good B being sold.

d. no difference in the quantity sold of either good.

13. When it comes to people's tastes, economists generally believe that;-

a. tastes are based on forces that are well within the realm of economics.

b. tastes are based on historical and psychological forces that are beyond the realm of
economics

c. tastes can only be studied through well-constructed, real-life models.

d. because tastes do not directly affect demand, there is little need to explain people's tastes.

14. Holding the non-price determinants of supply constant, a change in price would;-
 a. result in either a decrease in supply or an increase in supply.

b. result in a movement along a stationary supply curve.

c. result in a shift of demand.

d. have no effect on the quantity supplied.

15 A decrease in quantity supplied;-

a. results in a movement downward and to the left along a fixed supply curve.

b. results in a movement upward and to the right along a fixed supply curve.

c. shifts the supply curve to the left.

d. shifts the supply curve to the right.

16 Which of these statements best represents the law of supply;-

a. When input prices increase, sellers produce less of the good.

b. When production technology improves, sellers produce less of the good.

c. When the price of a good decreases, sellers produce less of the good.

d. When sellers’ supplies of a good increase, the price of the good increases.

17 Once the supply curve for a product or service is drawn, it;-

a. remains stable over time.

b. can shift either rightward or leftward.

c. is possible to move along the curve, but the curve will not shift.

d. tends to become steeper over time.

18 The supply curve for milk;-

 a. shifts when the price of milk changes because the price of milk is measured on the vertical
axis of the graph.

b. shifts when the price of milk changes because the quantity supplied of milk is measured on
the horizontal axis of the graph.

c. does not shift when the price of milk changes because the price of milk is measured on the
vertical axis of the graph.

d. does not shift when the price of milk changes because the price of milk is measured on the
horizontal axis of the graph.

19 Market supply curve is determined by;-

a. vertically summing individual supply curves.

b. horizontally summing individual supply curves.

c. finding the average quantity supplied by sellers at each possible price.

d. finding the average price at which sellers are willing and able to sell a particular quantity of
the good.

20 Suppose you make jewellery. If the price of gold falls, then we would expect you to;-

a. be willing and able to produce less jewellery than before at each possible price.

b. be willing and able to produce more jewellery than before at each possible price.

c. face a greater demand for your jewellery.

d. face a weaker demand for your jewellery.